Renowned investor Warren Buffett has gained recognition on an international scale through his innovative approach to making investments in traditional, reliable industries. It is through investments in such reliable industries as insurance, railroads, and utilities that he has succeeded in making Berkshire Hathaway the foremost investment corporation of our times through six decades of hard work and devotion. Even though he has retired as the chairman of the company recently, he has not wavered even a bit from his well-tried investment strategy in light of the AI fever sweeping across the globe.
However, Berkshire has not been totally unaffected by this surge of artificial intelligence technology; Berkshire has strategic stakes in some of the foremost tech companies, including Apple and Alphabet, that are affiliated with artificial intelligence. While Berkshire has not been reckless enough to throw its entire stake in blind belief of the technology, there is ample evidence suggesting that with the fast-paced growth of AI technology globally, Berkshire will increase its stake in the industry soon.
Energy will be needed to keep AI systems up and running, and in large quantities. The building of data centers around the world has completely changed electricity consumption, which is why traditional utilities have become one of the main beneficiaries of the AI revolution.
Berkshire directly controls many utilities involved in delivering electricity to several important parts of the United States, along with manufacturers of heavy equipment used in power plants.
AI Investment Move Goes to Energy Sector
Another one of the major holdings in the Berkshire portfolio is Apple – the tech company. This particular investment began back in 2016 when Buffett decided to make it. The underlying reason for this is the durability of the company and its market leadership in terms of being a strong consumer brand name.
In June of this year, it became known that the company decided to invest in Alphabet. Instead of betting on the traditional search engine part of Alphabet, the firm made an investment in the area of AI. However, in essence, the main Berkshire’s growth driver through the AI era is its energy sector.
Berkshire purchased MidAmerican Energy, an electrical utility company providing services to Iowa and other states in the Midwest region, in the year 2000—something having nothing to do with AI at that time. However, after 20 years, the revolutionary AI era is bringing a massive increase in the world’s energy requirements, which has turned out to be a huge financial success for Berkshire.
According to Ken Mahoney, the President & CEO of Mahoney Asset Management, energy and utility industries became a solution to meeting fundamental requirements for AI. It is important to add that Buffet’s foresight was based on the idea of owning industries which are necessary for the functioning of the entire economy. This serves as an example that "boring" industries yield steady profits.
“MidAmerican,” an electric power supplier in different states such as Iowa, currently acts as the principal source of energy for Iowa, which has become one of the top data centers locations. At the annual meeting last May, the CEO of Berkshire, Greg Abel, noted that 8 percent of their total electrical generation in Iowa had gone into powering the data centers in the previous year.
Cathy Seifert, a director at CFRA Research, pointed out that MidAmerican was not purchased to specifically serve AI purposes and it thus turned out to be more of a fortuitous move, but the industry is now playing an incredibly vital role in valuing Berkshire Hathaway’s presence in the present-day AI environment.
As explained by Seifert, this is an actual manifestation of Buffett’s ability to spot excellent and long-lasting companies that can benefit from the AI revolution directly while also gaining market attention as indirect investments in AI.
It should be mentioned that Berkshire also owns NV Energy, another large energy company based in Nevada, where there is a rapid growth of data centers. In this way, it becomes clear that several holdings of Buffett, despite the lack of an intentional AI strategy, turned out to be very profitable bets.
In 2016, Berkshire Hathaway purchased Precision Castparts, which produces vital components used in power generation turbines. Despite the acquisition leading to a subsequent loss of $11 billion in write-offs by the company due to overvaluation of the company by Buffett, the story is fast becoming a different one.
With the rapid increase in artificial intelligence driving electricity needs around the world, the sale of turbines fueled by gas has been growing, and the components used in these turbines have been made by Precision Castparts. As noted by the CEO of VistaShares, Adam Patti, with the turbine now being the major bottleneck in expanding data centers, the components supplied by Precision Castparts are the most desirable equipment in the market.
Net Worth of Warren Buffett
Currently the Chairman Emeritus of Berkshire Hathaway, the net worth of Warren Buffett is $144.6 billion (Forbes).
Warren Buffett has made an unprecedented promise that more than 99% of his entire wealth would be devoted towards philanthropic causes. As per this promise, he has donated more than $72 billion through the Bill & Melinda Gates Foundation as well as charities run by his children.
To ensure that the richest people of the world promise at least half of their wealth for humanitarian purposes either while living or in their wills, Warren Buffett, along with Bill and Melinda French Gates, has launched “The Giving Pledge” initiative.
